Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Adam, an Illinois resident, was interested in purchasing stock in Joshua Foods Inc. Joshua Foods has corporate headquarters in Fond du Lac, Wisconsin, and is

Adam, an Illinois resident, was interested in purchasing stock in Joshua Foods Inc. Joshua Foods has corporate headquarters in Fond du Lac, Wisconsin, and is incorporated in Delaware. Adam accessed Joshua Foods' 2017 annual report including the financial statements on its corporate website. Adam also reviewed several analysts' opinions on the Internet, including the opinions provided from his Internet broker, Matthew & Co. ExpressTrade. Adam received the annual report in the mail. Based on the increasing revenues, the $8 million net income indicated on the financial statements, and the other information received from the analysts, Adam purchased $350,000 worth of stock.

Three months later, Joshua Foods announced that over the past three years, the company had included $25 million of fictitious revenue and had capitalized more than $30 million of page 719charges that should have been expensed. These irregularities will result in a restatement of the fiscal 2017 financial statements, resulting in a $1,250,000 loss for fiscal 2017. The press release from the company says that it will likely declare bankruptcy in the next few weeks. In the following two weeks, the value of Adam's holdings in the stock declined to $50,000.

Required:

You are Adam's attorney. List the various legal issues and precedents that you will use in trying to recover the losses Adam sustained.

You are the attorney for Joshua Foods' auditors. It is apparent that Adam will try to recover losses from your firm. List the defenses you would prepare to protect the auditors from liability.

How does SarbanesOxley affect the position of either Adam's attorney or the auditors' attorney? You may find www.soxlaw.com helpful

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Criminal Law And Its Processes Cases And Materials

Authors: Sanford H. Kadish, Stephen Schulhofer, Rachel E. Barkow

11th Edition

1543810772, 978-1543810776

More Books

Students also viewed these Law questions

Question

4-2b accounting adjustments

Answered: 1 week ago